Semiconductor market commentator Dr Moshe Handelsman reiterated his warning of a looming recession in the chip business as the Semiconductor Industry Association’s book-to-bill ratio plunged to 1.01 in September from a revised 1.08 for August. The significant slowdown in the IC market that we predicted more than six months ago is currently happening, says the Advanced Forecasting chief. His quantitative forecast of chip orders extends seven months into the future and shows a clear slowdown of orders from mid-1993 to mid-1994. This plateau of orders for integrated circuits will have a strong impact on the IC market itself and on the semiconductor equipment industry, Handelsman predicts. Currently the industry is buying substantial amounts of manufacturing equipment in order to meet the present demand. Since orders are flat and our forecasting model shows that they will not recover in the next six months, the added manufacturing capacity will dictate cuts in IC prices, which, in turn, will make the downward slope steeper. Advanced Forecasting attributes the looming turning-point to a significant decline in its indicator of consumption of chips by the computer industry. This time we also see problems in the communications industry consumption of ICs, thus the IC market is facing a tougher time than in the 1989-1991 recession, adds Handelsman. Advanced Forecasting is also continuously monitoring the status of overbookings – orders in excess of requirements to make sure of adequate supply – and finds that these have now surpassed what was already a high peak in 1984: that led to one of the deepest recessions in chip industry history. Turning to last months figures, the Semiconductor Industry Association reports that average monthly orders for the three months to September were down 4.0% on the August figure at $2,161m – but were still 28.7% higher than the $1.679b figure for September 1992. Shipments on the same three-month moving average were $2,132m, up 2.0% from the August figure, and up 35.5% from the September 1992 figure of $1,574m. Actual shipments in September were $2,501m, up 22.6% on August and still 38.0% ahead of the September 1992 figure.
